Many Congressional Republicans believe that scrapping Fannie and Freddie is mandatory; Democrats disagree and President Obama is expected to support reforms backed by consumer, real estate and banking groups. The core of the emerging consensus is to preserve the 30-year, fixed-rate mortgage. Susan Woodward, former chief economist at the Department of Housing and Urban Development (HUD) and a founder of Sand Hill Econometrics, said “People regard it as a right as Americans to get a 30-year, fixed-rate loan.”

Banks and builders agree with consumer advocates representing homebuyers that it’s good for the government to promote residential lending by supporting what Fannie and Freddie have done for years – purchasing mortgages and bundle them into securities that they sell to investors. When the system works as intended, the MBS market creates additional money that is funneled back into the market to make new affordable loans. The task is to determine how to accomplish this without the lax practices that the taxpayers had to pay for when catastrophic losses occurred in 2008.

The Obama Administration and leading Democrats strongly believe that the federal government should have a role in promoting homeownership. Shaun Donovan, HUD Secretary, said “We should not compromise any of our core policy goals in the decisions we make in structuring our house financing system.”